Governments and businesses are coming together at the global United Nations (UN) climate meeting this November, COP27, in Egypt. This briefing provides an overview of COP with a focus on the role of businesses at COP27 and what it means for the independent director
The critical role of business and boards for climate action
Businesses are experiencing unprecedented challenges, including geopolitical issues, rapid societal changes and climate-related disasters, which introduce a range of new risks to mitigate against. The role of corporate boards is becoming increasingly important to help companies focus and prioritise on both short and long-term issues. One of the most critical areas that presents both risks and opportunities is climate change. There are increasing expectations from both investors and society which businesses and boards must meet to ensure the long term sustainability of their organisations.
Governments and businesses are coming together at the global United Nations (UN) climate meeting this November, COP27, in Egypt. The latest science shows that ecosystems and communities are being pushed to their limits as the impacts from climate change increase. Urgent and collective climate action is required to reduce the devastating impacts to society.
COP27 will build upon the progress made at the previous UN climate meeting, COP26, focusing on the commitment to deliver action on existing country pledges for climate adaptation, mitigation (emissions reduction), and finance. This will require coordinated mobilisation across governments, businesses, finance, and civil society. COP27 president Dr Sameh Shoukry has highlighted the fundamental role of the private business sector both in generating finance and in implementing climate action initiatives.
The UN Climate Champions highlight the priorities for businesses to strengthen resilience, mobilise finance, accelerate climate action and build the credibility of climate action plans. The We Mean Business Coalition also sets out an urgent call for business innovation in financing climate adaptation and resilience solutions: how to drive investment towards creating opportunities not just towards risk management; and how to collaborate with governments to develop policy frameworks supporting climate action.
Corporate board and independent directors have a critical role in guiding their companies on this important journey.
What are the UN climate meetings and what is their significance?
What is COP27?
Since 1995, the United Nation Framework Convention on Climate Change (UNFCCC) has been hosting an annual Conference of the Parties (COP), which brings together leaders from around the globe to prevent “dangerous human interference” with the climate. COP is the decision-making body responsible for monitoring and reviewing implementations of the UNFCCC and the Paris Agreement. This year, from the 6th to 18th of November, Egypt will host COP27 in the coastal city Sharm el-Sheikh.
COP27 will build upon the progress made at COP26 and prioritise implementation plans, strengthening of climate adaptation and resilience, the urgent reduction of greenhouse gas emissions (climate change mitigation) and climate finance.
Paris Agreement
The Paris Agreement was the first legally binding treaty on climate change and was the outcome of COP21 in Paris in 2015. As a result, most countries in the world have committed to:
- Hold the rise in the global average temperature to “well below” 2°C and ideally 1.5°C above pre-industrial levels (the COP26 Glasgow Climate Pact reaffirms a 1.5°C pathway).
- Strengthen their ability to adapt to the adverse impacts of climate change and build resilience.
- Orientate finance flows towards low greenhouse gas emissions and climate-resilient development.
Each country has the autonomy to decide by how much they are going to reduce their national emissions each year. These targets are communicated to the UNFCCC via nationally determined contributions (NDCs). The NDCs will be revised every five years via a ‘ratcheting up’ mechanism, however, since there is a large gap between required emissions reductions and planned emissions reductions, COP26 ended with a call for all countries to revise their NDCs in 2022 aiming to strengthen these targets.
Highlights from COP26, the 2021 global UN climate meeting
COP26 in Glasgow saw some areas of significant progress in the negotiations, with much work still to be done and some areas significantly off track. Below is a brief summary with further details in our COP26 briefing note under the ‘Learn more’ section below.
| Progress at COP26 | More to do | Far off track |
An agreement to update country commitments by 2022. To date, just 18 [at time of publication] of 198 countries have summited updated NDCs. An agreement to end inefficient fossil fuel subsidies. Doubling of climate adaptation finance to developing countries by 2025 The Paris Rulebook was agreed, including a framework for carbon trading A pledge to end deforestation by 2030, with £14bn funding A pledge to cut methane emissions by 30% by 2030 | Even though a global coalition of the financial sector was established with the creation of the Glasgow Financial Alliance for Net Zero (GFANZ) it was not possible to agree a pledge to stop or reduce fossil fuel finance. | 2020 target of spending $1 billion USD on climate finance was not met and the deadline was deferred to 2022. The world is off track to limit global warming. Global emissions are still rising, and a tangible solution has not been reached. |
COP27 significance and priorities
The COP27 President, Egypt’s Foreign Minister Sameh Shoukry, is emphasising the need to move from commitments to implementation whilst ensuring a fair distribution of resources, particularly for those who need it most. The COP26 President also emphasises the importance of re-routing financial investment from mitigation to adaptation whilst advocating for a multi-stakeholder approach.
COP27 is a clear opportunity to bring together state and non-state actors to identify and drive forward tangible actions that will enable fast and effective implementation of existing and increased commitments.
Mitigation
The urgent reduction of greenhouse gas emissions (climate change mitigation) will be an important priority at COP27. As agreed at COP26, countries are expected to update their NDCs ahead of COP27 and so far, progress with this objective is slow. However, there has been some significant progress on country-level mitigation commitments in the meantime. The EU has re-stated its commitments to speed up the switching to clean energy and end reliance on oil and gas. There are indications that China could peak emissions earlier than its official goal of 2030. The US has signed the Inflation Reduction Act into law, the largest climate investment in the country’s history. These developments by major emitters set a promising tone for COP27.
Climate finance
At COP15 in Copenhagen (2009) developed countries pledged to channel USD $100 billion a year by 2020 for climate action in developing countries. This commitment was reiterated in COP21 in Paris (2015) and extended to 2025. COP26 failed to deliver on this commitment, and there will be a push to deliver this promise at COP27.
GFANZ was established at COP26 with the aim to mobilise the financial sector to accelerate the transition to a net zero global economy. GFANZ brings together the world’s largest banks, asset managers, and asset owners into a single financial sector coalition. This coalition aims to redirect their financial flows towards companies with robust and credible plans to reduce emissions which presents a direct call to business to develop, deliver and disclose bold net zero strategies and action plans. GFANZ is planning to release its new recommendations for the development of a Net-Zero Data Public Utility (NZDPU) at COP27 which aims to standardise climate transition-related data across reporting organisations.
Climate adaptation
Climate adaptation describes the actions needed to prepare for the impacts of climate change. It is about building resilience and ensuring that businesses and communities have the right tools to manage the risk and disruptions from extreme weather events, as well as embracing the opportunities of building resilience.
Whilst financing for climate mitigation and adaptation has increased up to 60% from 2013 to 2020, the major focus has been on mitigation. An important outcome of COP26 was to “urge developed nations to at least double their collective provisions of adaptation finance by 2025” in order to close the gap between adaptation and mitigation.
A greater pledge on climate adaptation funding at COP27 would help to strengthen policy and regulatory frameworks and send important signals to business and other non-state actors on the urgent need for action on adaptation and resilience.
Just Transition
A major challenge for the delivery of the Paris goals and objectives is how the world will transition to lower carbon economic activities while guaranteeing access to decent work and how to fairly distribute the risks and rewards associated with the transition. This challenge is known as Just Transition.
In recent years the just transition framework has been globally pledged as an opportunity to turn climate action into an economic and social development opportunity. However, the finance and the technology capacity needed to work on this challenge is out of reach for many developing nations.
COP27 could be the decisive moment to define the financial frameworks needed to support a just transition in developing countries. Also, it is an opportunity to strengthen the alliances needed to make sure that every country can deliver a just transition aligned to its specific needs. Well-defined guidance on Just Transition will also support businesses to manage these risks and harness the opportunities of the climate transition.
The role of business and business engagement at COP
The High-Level Champions and the Marrakech Partnership
The Marrakesh Partnership for Global Climate Action was created at COP22 to enhance collaboration among governments, cities, regions, businesses, and investors to accelerate global climate action. Under the leadership of Dr Mahmoud Mohieldin, the UN High-Level Climate Champion for COP27, and Nigel Topping, High-Level Climate Champion for COP26 , the Marrakesh Partnership has developed an agenda with a focus on delivery of emissions reductions and a just transition to a net zero economy.
At the Net Zero Delivery Summit in May 2022, the High-Level Champions agreed that the focus should be on implementation of climate commitments, as well as developing innovative financing solutions for resilience and adaptation that leverage the role of the insurance sector.
Business engagement at COP
As with other UN COP meetings, COP27 will run in two spaces: the Blue Zone and the Green Zone. The presence of the media will be very significant. If physical attendance has been granted, there will be numerous opportunities for media engagement for your organisation at the conference.
The Blue Zone is where the official negotiations will be carried out and attendees must be accredited by the UNFCCC. The Blue Zone includes Nation-State pavilions, business pavilions and special event rooms. The business pavilions include exhibition halls to enable direct engagement of business with international policy delegates. The We Mean Business Coalition will host the Business Pavilion for Climate Leadership engaging business and policymakers to deliver on pledges to keep 1.5°C alive. | The Green Zone is a space managed by the Egyptian government to showcase innovation and climate action facilitating interaction between private sector organizations, civil society, NGOs and academia. |
Events running alongside COP27
In the run-up to COP27, there has been a range of events and conferences from different sectors, covering different elements of the COP agenda including the Net Zero Delivery Summit, Bonn Climate Change Conference, and Climate Week NYC. There will also be a number of side events alongside the COP for businesses to attend. These events will mostly be in Sharm El-Sheik but can be joined also remotely: World Climate Summit, World Biodiversity Summit, Sustainable Innovation Forum.
COP27 engagement opportunities for independent directors
For independent directors, COP27 presents some clear engagement opportunities at board level, based around the key themes being addressed at the meeting:
Mitigation and implementation:
Implementation of existing mitigation pledges will be a key topic at COP27. The development of credible action plans supporting the corporate net zero transition is a priority area as processes and frameworks emerge to monitor business progress and combat greenwash.
- Does your organisation have clear targets to reduce its climate impact across the whole value-chain?
- Has your company integrated sustainability and climate action into its business strategy?
- How clear is the underpinning climate implementation plan, how are you monitoring its progress, and are there regular climate-related reporting updates to the board?
- What opportunities for climate-related reinvention, collaboration and innovation are you guiding your company on?
- Do you have agreed climate disclosure plans to meet legal requirements and expectations from your stakeholders? As well as a clear understanding of what potentially misleading information might mean for the company and the board?
Finance
An impactful group of Financial Services companies have come together as The Glasgow Financial Alliance for Net Zero (GFANZ). They will be active at COP27 working to enable net zero transition planning for financial institutions and mobilise capital for emerging markets and developing economies to decarbonise.
- How will your organisation be affected by data reporting requirements of GFANZ members which are required in your business investment portfolios or lending streams? Is your board fully informed on these requirements and their implications for the company and the board?
- How can your organisation support capital flows for net zero investment in developing countries?
Adaptation
COP27 is aiming for increased pledges on climate adaptation funding to support countries disproportionally affected by the impacts of climate change and least able to respond.
- What measures has your organisation put in place to address the risks, impacts and opportunities of climate change in the future?
- Do you have a future-proof and resilient business model?
- If you have operations, suppliers, or customers in multiple locations, are you addressing adaptation and resilience issues across those locations?
Just Transition
The strategic integration of a just transition framework is critical to safeguarding the successful achievement of business transformation. Just transition means a movement to minimize the negative impacts on impacted groups, while transforming to a sustainable business. This integration will strengthen the company’s business and social value.
How has your company integrated a Just Transition framework into the corporate strategy and business operations? What are the potential transition scenarios for your company and how are these impacting different stakeholders?
Learn More
Take the opportunity to learn more from some relevant reports.
- Chapter Zero Risk and Opportunities
- Climate Governance Initiative explainer: ‘Navigating the climate disclosure landscape’
- Climate Governance Initiative’s Ambition to Action briefing for board directors
- Climate Change Litigation: What Board Directors need to know – Climate Governance Initiative
- The Chairperson’s Guide to a Just Transition
- Centre for Climate Engagement’s COP26 Briefing.
Keep up to date on COP27
Climate action is ongoing and rapidly evolving. Business needs to strengthen efforts by forging productive collaborations and developing innovative climate solutions, with COP27 providing an opportunity to engage with the global climate discussion.
Keep up to date by following COP27 news from the We Mean Business Coalition and the Climate Governance Initiative post-COP27 briefing for board directors.
Exchange and engage with other independent board directors
Engage with other independent directors focused on making climate a boardroom priority by joining your local Chapter – gain the knowledge and expertise needed to ask the right questions of your company’s executives to drive climate action in your organisation.
Build momentum and invite other members of your board to join a local Chapter.
Be a role model and responsible leader – for your company, your society, and future generations.